RE: UKW tipped by Kepler’s Heathcote Amory1 Jan 2026 21:29
"As such, my choice for 2026 is Greencoat UK
Wind (UKW). Renewables stocks have been beaten
up hugely this year, and UKW currently trades on
a discount to NAV of c. 30%. Fundamentally, UKW
is churning out plenty of electricity and being paid
for it, which, with subsidies, funds the attractive
dividend yielding 10.75%. A yield that high should
raise eyebrows. The stock market hates uncertainty,
and in this regard, the UK renewables sector and
UKW do face one uncertainty — that of the subsidy
regime. The UK government is consulting on the
future link to inflation of subsidies, and this, as
well as a waning of appetites towards higheryielding, private asset trusts, has contributed to this
significant derating.
For me, the disconnect between fundamentals and
perceptions can be encapsulated by the huge ris
Greencoat, UK electrical demand is, conservatively, set to
increase by 30% by 2035, driven by the electrification of
transport, heat, and the expansion of data centre capacity.
This sits against a backdrop of scheduled plant retirements
in the next decade, with a quarter of the UK’s nuclear fleet
and 20% of the gas fleet set to retire. Renewables will
be a key part of delivering the UK’s electricity for years
to come. The government needs to make investment in
the space attractive, and a ‘win-win’ conclusion to the
current consultation for both bill payers as well as owners
of renewable energy assets is entirely plausible. If so, it
would give a boost to beleaguered share prices.
Medium term, and specific to UKW, is its structurally higher
dividend cover. It is this that has enabled the trust to stick
to its pledge made at IPO to raise its dividend in line with
inflation each year. However, the excess cash that UKW
throws off gives it options to make new investments,
continue with buybacks, or reduce debt. UKW’s gearing
is slightly above the company’s preferred range, and the
current slowdown in private market deal activity for UK
renewable assets isn’t helping. That said, in the past 12
months, UKW has completed £222m of asset disposals
at NAV. The trust has largely completed a £200m share
buyback programme, which has added 1.7p per share to
NAV. We understand the team are working towards further
asset disposals, with a range of potential buyers.
Fundamentally, UKW appears resilient. With the shares
having derated so far, I think there is a strong prospect of
a decent total return (i.e. dividends reinvested) for 2026 as
its strong fundamentals are reappraised by the market."
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